SOSC Lecture #6
October 24 2013
• 6. Attack on Keynesianism (Right & Left)
• Late 1960s early 1970s, interesting developments.
• Leader of free world, US, suffering from huge balance of payment problem, Vietnam war.
• Early 1970s, govt running deficit after deficit.
• Increasing level of unemployment and inflation -> Stagflation.
• Under Keynesian, its theoretically impossibly.
• Road to freedom, promise of post-war world.
• Response -> The road of serfdom. Not about liberalism, not capitalism, it was big
governments. About advance socialism
• Milton Freedman, argues we may be Keynesians.
• Focus on inflation as a problem, supply problem, taxing and spending, monitory policy.
• Keep inflation as low as possible, regardless of cost and unemployment.
• A) Government is too big, so large that Keynesian policies are messing up the economy.
Income tax too high.
• Personal income tax, so high that people aren’t interested in making money.
• Corporate tax, too harsh.
• End of world war, 50 cents of every dollar in income tax came from corporate. Now its 8-
• De-Regulate the economy.
• During K period, govt became active participants.
• Get govt out of market as a competitor to private businesses
• B) Big Labour.
• 1944, fed govt of Canada, collective bargain compulsory
• Companies MUST talk to unions. Bargain in good faith.
• Cant be fired for doing union work.
• Inflation -> bargain power is weakened.
• Govt acting like Robin Hood. Steal from rich, give to poor. Keynesian welfare state.
• Ideological right, stop robin hood.
• Time to privatize, return to self regulating, disembbed, free regulated market. Smith
• Ideological Left
• 1848,in a capitalist economy, govt is the tool of the capitalist class, Marx.
• Bourgeois says jump, govt says how high?
• Capitalism in crisis, eventually destroy replaced by socialism.
• Transform socialism into communist socie